Cryptocurrencies to disrupt banking system—Economist


Growing cryptocurrency transactions could disrupt the banking system and throw the Bank of Ghana’s (BoG), monetary policy regime out of order, Peter Quartey – Professor of Economics at the University of Ghana, Legon – has warned.

Cryptocurrency is secured digital representation of the money individuals use daily. With bank notes, the amount of money in circulation is determined and regulated by the central bank.

However, cryptocurrencies are not controlled by a central government; they are not printed and do not get old. They don’t have unlimited supply but are fixed in the amount that can be in circulation.

Paa Kwesi Menz, a Crypto Porfolio Specialist, explains to the B&FT that: “Thanks to encryption, a cryptocurrency is able to disintegrate itself into various units to be used by lots of people. For Instance, sharing a GH¢1 note to 15 people it would be difficult to cut the GH¢1 into 15 pieces to be used by them. The moment scissors cut the Ghana cedi bill, it becomes useless. But cryptocurrencies are not like that. Encryption-enabled divisibility allows it to be done.

“Each unit divided is unique and has its own code as well as being time-stamped – meaning, one cryptocurrency can be used by several people for different transactions. This makes it difficult to have it counterfeited. That is another important point to note: no counterfeit with cryptocurrencies – a secret to their growth.”

Every transaction conducted with a cryptocurrency is recorded on an online ledger/database that is accessible to all. This ledger or database is called a Blockchain. This makes transactions transparent and trusted. However, this is outside the control of the central bank – a situation that, according to Professor Quartey, raises various issues.

“The central bank is not able to regulate it. The central bank, as one of its core functions, is meant to regulate the money supply in the system, but with this cryptocurrency – because the bank doesn’t have oversight responsibility – it is not able to control it; and the volume of funds that I hear goes through is billions of dollars. So, it looks like it makes monetary policy less effective because you are unable to control,” Prof. Quartey said.

Another challenge Prof. Quartey sees with cryptocurrency is its potential to promote illicit flows of funds, otherwise known as money laundering, into the country.

“One other problem with this cryptocurrency is that it promotes illegal transactions or illicit flow of funds. The Anti-Money laundering Act forbids certain amounts of transactions from being moved from point A to point B.

“If a huge sum of money hits your accounts more than what is expected, security agencies are quickly called in to come and investigate. But with this one, nobody has control. So it’s an avenue for illicit flow of funds, and the fight against money laundering will be severely affected. Other illegal activities can go on there without being noticed,” he said.

He urged the Bank of Ghana to analyse the situation and come out with guidelines and policies that will mitigate the risks cryptocurrency transactions pose to the economy.

Bankers brace for change  

President of the Chartered Institute of Bankers (CIB), Mrs. Patricia Sappor, earlier this month urged banking professionals to begin serious discussions about how virtual currencies can affect the future of banking in Ghana.

According to her, the discussion is more imperative now as cryptocurrency is the next big thing; noting that, as of November 2017, transactions of Cryptocurrencies like Bitcoin have reached a record US$185billion.

“Is Cryptocurrency a threat to banking; will cryptocurrency disrupt the banking system, for example remittances; and how do we position ourselves to face the crypto environment in the near-future?

“We, as professional bankers, will have to stay relevant and be abreast with key developments within the global and domestic banking landscape to deliver quality professional banking education in Ghana and meet the ever-changing demands of the times,” Mrs. Sappor said.

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